Business MGMT Chapter 17

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annual report
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an audited document required by the SEC containing financial information and provided to shareholders at the end of the year
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bonds payable
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long-term debt owed by a company to investors who have purchased bonds
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depreciation
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noncash expense that reduces the value of an asset over a prescribed period of time due to wear and tear, age or obsolescence
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income statement
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a financial statement that summarizes a firm’s performance and indicates the profitability (or loss) over a period of time
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intangibale assets
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non-monetary assets that cannot be seen, touched or physically measured
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notes payable
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short- or long-term obligations to banks or other creditors based on formal written agreements
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operating expenses
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expenses incurred as a result of normal buciness activities in an organization, but not directly associated with production
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retained earnings
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earnings reinvested in the business or used to pay off debt
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accounting cycle
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a sequence of procedures repeated in the same order from the point of the transaction to its appearance in the financial statements
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accounts payable
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money owed by a company to its suppliers and/or vendors for products or services purchased on credit
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balance sheet
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financial statement that shows the financial position of a company on a specific date
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cost of goods
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the costs of obtaining raw materials and all parts involved in producing the finished goods sold to consumers
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gross profit
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the difference between revenue from the sale of goods and the costs related to producing those goods
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ledger
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the accounting book in which transactions are listed in separate accounts
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liabilities
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a company’s debts or obligations that come about during the course of business operations
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revenue
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the income a company receives from its main business activities during a specific period of time
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cash flow
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a measure of a company’s financial health found by calculating the difference between cash receipts and cash payments
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current assets
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a balance sheet account combining assets that are expected to be converted to cash within a year
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double-entry
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an accounting technique that records financial information as both a debit and a credit
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fixed assets
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tangible propery that a firm owns and does not convert quickly into cash
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independent audit
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an examination of a firm’s financial statements done by a certified public accountant (CPA) who is not an empoyee of the firm
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liquidity
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the ability of an asset to be converted into cash quickly without any impact on the price of the asset
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managerial accounting
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the branch of accounting that measure, analyzes and communicates information about a company’s operations to internal managers to aid their decision making
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trial balance
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an informal accounting schedule that lists general eldger account balances at a point in time
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accounting
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the recording, classifying, summarizing, and interpreting of financial events and transactions to provide management and other interested partis the information they need to make good decisions
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assets
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economic resources (things of value) owned by a firm
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auditing
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the job of reviewing and evaluating the information used to prepare a company’s financial statements
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bookkeeping
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the recording of business transactions
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certified internal auditor (CIA)
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an accountant who has a bachelor’s degree and two years of experience in internal auditing, and who has passed an exam administered by the Institute of Internal Auditors
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certified management accountant (CMA)
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a professional accountant who has met certain educational and experience requirements, passed a qualifying exam in the field, and been certified by the Institute of Certified Management Accountants
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certified public accountants (CPA)
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an accountant who passea a series of examinations established by the American Institute of Certified Public Accountants (AICPA)
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cost of goods sold
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a measure of the cost of merchandise sold or cost of raw materials and supplies for producing items for resale
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financial accounting
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accounting information and analyses prepared for people outside the organization
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financial statement
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a summary of all the transactions that have occurred over a particular period
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fundamental accounting equation
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assets = liabilities + owners’ equity; this is the basis for the balance sheet
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government and not-for-profit accounting
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accounting system for organizations whose purpose is not generating a profit but serving ratepayers, taxpayers, and others according to a duly approved budget
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journal
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the record book or computer program where accounting data are first entered
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net income or net loss
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revenue left over after all costs and expenses, including taxes, are paid
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owners’ equity
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the amount of the business that belongs to the owners minus any liabilities owned by the business
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private accountant
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an accountant who works for a single firm, government agency, or nonprofit organization
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public accountant
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an accountant who provides accounting services to individuals or businesses on a fee basis
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ratio analysis
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the assessment of a firm’s financial condition using calculations and interpretations of financial ratios developed from the firm’s financial statements
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statement of cash flows
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financial statement that reports cash receipts and disbursement related to a firm’s three major activities: operations, investments, and financing
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tax accountant
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an accountant trained in ta law and responsible for preparing tax returns or developing tax strategies
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balance sheet list
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accounts receivable, land, patents, long-term liabilities, owner’s equity
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income statement list
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revenues, costs of goods sold, advertising expense, insurance expense, income tax
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statement of cash flow list
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net change in cash, cash balance
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(1) analyze source documents
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separate purchasing receipts from sales documents
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(2) record transactions in journals
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record financial data
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(3) transfer journal entries to ledger
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post individual transactions into a single account
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(4) take atrial balance
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summarize data in the ledgers
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(5) prepare the financial statements
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prepare income statement
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(6) analyze financial statements
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evaluate profit/loss of the firm

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